- FTSE 100 loses 66 points
- Claim and counter claims confuse the situation on the Russian-Ukrainian border
- Airline stocks friendless
4.50pm: FTSE 100 loses 66 points
The UK's blue chip index ended the day at 7,537 points, a 0.9% loss on the trading day as fears about the Russia-Ukraine situation rattled investors.
‘’Financial markets took a turn for the worse after warnings from the US administration that there is evidence on the ground that Russia is moving towards an imminent invasion of Ukraine," commented Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.
"Reports of firing in a border region and accusations that Moscow is orchestrating a false flag operation, an intent to pin the blame for starting conflict on Ukrainian forces, has ratcheted up tensions and led to more investors seeking less risky positions."
3.05pm: FTSE 100 rallies a little after sliding below 7,500
The FTSE 100 briefly fell below 7,500 but has rallied a bit to 7,510, down 94 points (1.2%).
“We’ve seen another day of uncertainty and market declines on claims and counter claims between Russia and NATO about the size and movement of Russian forces on the Ukrainian border. Russia has continued to deny that it is increasing the size of its forces, while reports of shelling and firing on a village in Eastern Ukraine by pro-Russian forces, hasn’t helped sentiment, with pro-Russian forces blaming Ukrainian forces,” said Michael Hewson at CMC Markets.
— Ukraine / Україна (@Ukraine) December 7, 2021
“This is likely to be the bigger concern for NATO and the US, if separatist forces try and goad Ukrainian forces into a counter-response, thus creating an excuse for a Russian incursion, and for all hell to break loose.
“It’s therefore not surprising that against this backdrop we’ve seen European markets come under pressure as the gains of Wednesday disappear. The bigger risk for markets is that President Putin simply leaves the bulk of his forces on the border and simply plays a game of cat and mouse for the next few weeks and months,” he added.
The increased tension has seen British Airways owner International Consolidated Airlines Group (LSE:IAG) SA, down 4.4% at 165.78p, take a bath while oil giants Shell PLC (LSE:SHEL, NYSE:SHEL, EURONEXT:SHELL) and BP PLC (LSE:BP.) are also out of favour, with the former down 3.4% and the latter 2.5% weaker.
2.50pm: US markets open sharply lower
US traders’ terminals are a sea of red this afternoon after President Biden said the probability of an attack on Ukraine is “very high”.
The Dow Jones average was down 465 points (1.3%) at 34,469, the S&P 500 was 64 points (1.4%) weaker at 4,410 and the Nasdaq Composite was down 222 points (1.6%) at 13,901.
In London, the weak start by US markets has sent the Footsie into a tailspin with the index down 98 points (1.3%) at 7.506.
2.10pm: Ocado defies the trend
Shares in Ocado Group PLC (LSE:OCDO), up 0.2% at 1,345p, were going against the flow after the technology group extended its partnership in France with Group Casino.
Veteran retail analyst Clive Black at Shore Capital has picked up on Ocado’s statement that the new agreement will not involve any initial capital requirements.
“The operative word here is, however, ‘initial’. To fulfil development plans where cash returns are not upfront and central, we believe Ocado will need to raise further funds from the market,” Black said.
The cost of buying Ocado shares is not the only thing going up; in the period 3 to 13 February 2022, 76% of adults reported their cost of living had increased over the last month; this was up 7 percentage points from 69% in the preceding period 19-30 January), the Office for National Statistics reported.
The most frequently reported reasons continued to be:
- rising food shop prices (90%)
- rising energy bills (77%)
- increases to the price of fuel (69%)
In the week to 12 February 2022, overall retail footfall in the UK increased by 2% from the previous week and was 86% of the level seen in the equivalent week of 2019, the ONS reported in its economic activity and social change report.
This is the fifth consecutive week of increasing retail footfall and was again driven in part by weekly rises in high street footfall, according to market research group Springboard.
Of the 96% of adults in Great Britain who reported leaving home in the past seven days, the proportion that did so and reported wearing a face-covering decreased by 7 percentage points from the previous period, to 88%.
The FTSE 100 was down 61 points (0.8%) at 7,543.
1.00pm: Out to lunch
In the words of John Lydon, “you’ll always find me out to lunch” – at least, that is the way it seems for the Footsie.
London’s index of blue-chip stocks has barely moved over the lunchtime trading session, down 45 points (0.6%) at 7,559.
“It's been a rather strange week that started with warnings of an imminent invasion – repeatedly denied by Russia – followed by claims of troops withdrawing following the completion of planned drills which has since been rejected by Ukraine and NATO, who have instead insisted that numbers are rising, not falling. It's no wonder investors don't know which way to turn,” said Craig Erlam at OANDA.
“Clearly, tensions are going to remain until we see a confirmed and substantial reduction of troops at the border but rather than abandon risk as they did late last week and early this, investors seem comfortable sitting on the fence. Of course, that could change if we see any escalation or as we head into the weekend if we have no further clarity.
“The West remains convinced that an invasion remains highly likely and that flare-ups in Eastern Ukraine between Russian-backed separatists and Ukrainian forces could be used to justify crossing the border. Whether the intelligence is trustworthy or hysteria, as Russia has labelled it, will soon become clear but in the interim, efforts towards a diplomatic solution continue which will keep investors on edge,” Erlam said.
Equities may be under a cloud but at least there is always gold. The yellow metal is up US$23 (1.2%) at US$1,894.50 as risk-averse investors seek the alleged safety of bullion.
“The metal has found support from several major sources. These include: (1) heightened geopolitical risks and stock market volatility; (2) falling real yields, and more to the point (3) soaring inflation,” explained awad Razaqzada, a market analyst with ThinkMarkets.
“Indeed, the number one source of support for gold is rising price levels around the world as investors seek to protect their purchasing powers from being eroded by depreciating fiat currencies. Inflation has reached multi-decade highs around the world, and a record high in Eurozone. Although soaring inflation has raised concerns about policy tightening from the Fed and other major central banks, this has been offset by the fact real yields haven fallen sharply, boosting the appeal of non-interest-bearing assets like gold. The real yield on the 10-year note is around -5.5%, which has been derived from 2% nominal yield minus 7.5% CPI inflation. This means that real yields will not move into the positive territory with a bit of policy tightening, without a sharp fall in nominal inflation rate,” he added.
11.50am: US markets tipped to open lower
US stocks are expected to open lower as conflicting reports emerge on the situation on the Russia-Ukraine border, with US officials dismissing earlier reports from Russia’s Defence Ministry that it had begun pulling back some of its troops after training exercises near the border.
Futures for the Dow Jones Industrial Average declined 0.46% in Thursday pre-market trading, while those for the broader S&P 500 index fell 0.54% and the tech-heavy Nasdaq shed 0.7%.
Stocks recovered some of their losses in late Wednesday afternoon trading after minutes from the Federal Reserve’s January meeting did not point at any hastened moves for interest rate hikes - but affirmed to investors that the central bank will raise interest rates as early as next month. Earlier, a White House official said Russia's claim that it is moving troops away from the Ukraine border was false, saying thousands of additional troops have arrived in recent days.
At the close, the Dow was just 0.16% lower at 34,934, with the Nasdaq down 0.11% at 14,124, while the S&P 500 closed with a 4 point gain to 4,475.
“(The) good mood didn’t last long as the US didn’t let the tensions de-escalate insisting that Russia is certainly not pulling back its troops but is rather increasing its presence at the Ukrainian border,” commented Ipek Ozkardeskaya, senior analyst at Swissquote.
“The US warning hit the investor appetite at yesterday’s session and reversed the earlier week gains in stock indices. As a result, the safe-haven flows boosted gold, again. The price of an ounce is back above the $1,875 mark, as crude oil is steady around $92 per barrel."
In London, the FTSE 100 is staying in that “down roughly 45 points” groove, down … er … 45 points (0.6%) at 7,558.
Footsie constituent Aveva Group (LSE:AVV) PLC fell in line with the wider index after it weak fiscal third-quarter revenues in a trading statement.
“Although AVEVA saw a low single-digit decline in its revenue in Q3 FY 2022 compared with the year before, the group attributes this to several large contract renewals. This includes a contract renewal and expansion with Schneider Electric, the French energy management and automation company,” said Edison Group’s Neil Shah.
“Given the current inflationary climate, AVEVA anticipates the uplifting of prices. The group expects sales to remain solid for the rest of the year, with the revenue outlook for the full year forecast to meet previous expectations,” he added.
10.40am: Help to Buy or Help to Sell
Between 1 July and 30 September, 2021 7,270 properties were bought with an equity loan in the UK, a decrease of 39% from the same period in 2019, the Office for National Statistics (ONS) reported.
In a report on the government’s ‘Help to Buy’ scheme, the ONS said 346,656 properties were bought with an equity loan in the period from 1 April 2013 to 30 September 2021. The total value of these equity loans was £21.4bn, while the value of the properties sold under the scheme was £96.4bn.
The number of completions dropped significantly when the initial lockdown restrictions were imposed due to the COVID-19 pandemic, the ONS observed. Completions in May 2020 were down by 66% when compared to May 2019. Following the removal of restrictions and the introduction of the stamp duty holiday in July 2020, completions increased, with December 2020 having the highest number of completions for the entire scheme, 35% higher than December 2019.
Following the introduction of the current help to buy scheme in April 2021 with eligibility restricted to First Time Buyers, and new regional price caps, completions have reduced. In July 2021 completions were down by 44% compared to July 2019, it added.
Figures for September show that the average price of a property bought through the Help to Buy ISA scheme was £175,680, compared to an average first-time buyer house price of £225,607 and a national average house price of £269,945.
Since then, the national average has risen to a record high in December of £274,712, up £27,000 year-on-year – no wonder some people refer to the scheme as “Help to sell”.
The average first-time property was sold for £228,627.
Sarah Coles, the senior personal finance analyst at Hargreaves Lansdown, said runaway house prices risk overtaking the Help to Buy ISA limits.
“At times like this, first-time buyers need government schemes more than ever, so it’s a real kick in the teeth that many will get to the point of buying a property and discover they can’t take advantage of the bonus,” she opined.
“When the Help to Buy ISA was launched in December 2015, the average price paid by a first-time buyer was less than £175,000, so the limit of £250,000 (and £450,000 in London) gave buyers plenty of scope to find the home they wanted.
“In the seven years since the average first-time buyer price has risen more than a quarter to over £225,000 and the limits haven’t moved an inch. As a result, we’re getting perilously close to the day when nobody using the scheme can afford to buy an average starter home. It means that people who started a Help to Buy ISA in good faith back in 2015 could get to the point of purchase and realise they won’t get the bonus they were expecting,” Coles said, perhaps undermining her assertion that first-time buyers “need government schemes more than ever”.
Purely by coincidence, property listings website Rightmove PLC (LSE:RMV) was among the minority of Footsie stocks to make headway this morning, rising 1.1% to 635.6p.
The FTSE 100 index was down 43 points (0.6%), with Russian steel firm Evraz PLC (LSE:EVR), down 5.9% at 310.4p, the biggest faller as investors remain nervous about developments on the Russia-Ukraine border.
Full-year results from Standard Chartered PLC (LSE:STAN) did not go down well, with the shares shedding 4.4% at 524.6p. Fellow Asia-focused bank HSBC Holdings PLC fell 1.7% to 538.9p in sympathy.
“Standard Chartered, something of an outlier among the UK banks given its emerging markets focus and a very limited footprint in Britain, got the sector’s reporting season off to a weak start with profit below expectations,” commented Danni Hewson at AJ Bell.
9.45am: Footsie feels a chill
The weather outside is frightful and the Footsie is far from delightful unless you are a shareholder of Reckitt Benckiser Group PLC (LSE:RKT, ETR:3RB).
The FTSE 100 is down 48 points (0.6%) at 7,556, despite Reckitt advancing 5.0% to 6,095p after it raised revenue guidance this morning.
READ Reckitt reports revenue ahead of expectations and forecasts growth for 2022
“The pandemic provided a massive boost to sales of disinfectant products like Dettol and Lysol, and as we emerge from the other side where those products rebase is being carefully watched. So far, it looks like behavioural shifts are sticky as Dettol sales are coming down but stabilising well ahead of pre-pandemic levels and Lysol sales continue to grow,” said Matt Britzman at Hargreaves Lansdown.
“As we’ve seen across the broader industry, inflation concerns are front and centre and prices will need to flex in the coming year to help offset that. The strong brand presence of much of Reckitt’s range should help it navigate the inclement inflationary environment, with customers likely to stay loyal to tried and trusted products, even if they are forced to tighten their belts elsewhere. The disposal of lower-margin areas will certainly help with weathering that storm, and with the underperforming Chinese Infant Child Nutrition business now behind them, the outlook is starting to look brighter,” he added.
8.30am: Traders keep one eye on Ukraine
Mixed sessions on Wall Street and in Asia made for a quiet start for the FTSE 100.
Sentiment is finely poised after Nato pushed back on claims that the numbers of Russian troops on the border with Ukraine were falling.
Inflation continued to provide a negative undercurrent too in the aftermath of the worst consumer price print in 30 years.
The morning’s big move was from consumers staples group Reckitt Benckiser, which appears to have been largely immune to those rising prices.
An update from the Airwick and Strepsils maker was greeted with a 4.3% rise in the share price.
Ocado, which has been hard hit post its results last week, was up 1.4%, as bargain hunters came out the woodwork.
BAT was the day’s biggest faller, off 3.3% after the tobacco giant began trading without entitlement to its rather chunky final dividend.
6.55 am: Further falls predicted
The FTSE 100 is expected to fall further today after a mixed session for US stocks overnight and as attention turns to the UK banking sector in today's results.
Declines of 25-33 points have been predicted by spread-betters for the London equity benchmark, having finished the previous day five points lower at 7,603.78.
Overnight, the Dow Jones and Nasdaq declined 0.16% and 0.11%, while the S&P 500 index edged up 0.09% and the small-cap Russell 2000 finished up 0.14%.
Stock markets reacted positively to minutes from the latest meeting of the Federal Reserve's policy committee, which suggested there would be four interest rate hikes this year, rather than the six or seven that some were predicting.
"Prior to the release of the FOMC minutes, investors were concerned that the Fed would become more aggressive in order to control the highest inflation seen in nearly 40 years," said market analyst Naeem Aslam at AvaTrade.
Furthermore, while it’s widely accepted that US rates will rise in March, markets are still split between whether the Fed will move by 25 basis points, or by 50bps.
"Nonetheless, based on those minutes, US markets took the positives from the fact that there wasn’t a significant quorum of policymakers in favour of a 50bps rate rise, closing well off their lows of the day," said Michael Hewson at CMC Markets.
"The problem with that logic is that last night’s minutes predate a host of economic reports that not only point to a stronger than expected US economy but also surging inflation. We’ve seen US payrolls come in much stronger than expected, a better-than-expected Q4 GDP report, CPI inflation at a 40 year high, and a strong retail sales report for January.
"Are investors really assuming that none of these economic reports has shifted the calculus towards any of those members changing their minds and deciding to lean towards 50bps? If so, this seems rather naïve," Hewson said.
Back on domestic issues, Standard Chartered PLC (LSE:STAN) will today be the first of the Footsie banks to release fourth-quarter earnings, ahead of NatWest tomorrow and the rest of the sector in the coming week.
There are also updates from Aveva Group (LSE:AVV), Reckitt Benckiser Group PLC (LSE:RKT, ETR:3RB), Moneysupermarket.com (LSE:MONY) and Safestore Holdings (LSE:SAFE).
6.50am: Early Markets - Asia / Australia
Asia Pacific shares were mixed on Thursday even as NATO on Wednesday warned that Russia has increased the number of troops it has gathered at the Ukrainian border, a day after Moscow claimed it had begun withdrawing some of its troops.
Japan’s Nikkei 225 fell 0.83% while South Korea’s Kospi rose 0.53%.
The Shanghai Composite in China and Hong Kong’s Hang Seng index gained marginally, up 0.06% and 0.03%, respectively.
Australia’s S&P/ASX200 closed 0.16% higher after the country added 12,900 jobs for January.
The unemployment rate was held steady at 4.2%, according to figures from the Australian Bureau of Statistics, in line with expectations.